Brown v. Clark

Interlocutory judgment appealed from in each case affirmed, with costs, with leave to amend answer within 20 days as to the issue in question, upon payment of the costs of this appeal, on opinion of Adams, J., at special term.

If this were an action in which the court felt itself authorized to determine the issue upon principles of equity, it would not be a matter fraught with much difficulty to hold that the pleading demurred to contained a good defense, for it is easy to see that the plaintiff is taking advantage of a condition of things for which he is in a measure responsible to enforce the payment of a debt by parties who, while technically guilty of an omission of their statutory duties, have not by such omission prejudiced the plaintiff or his assignor in the slightest degree. But ' the action is a strictly legal one, and, moreover, it is brought to enforce a statutory liability, which, although highly penal in its character, is one which is also beneficial, so far as the general public is concerned; and therefore, while the courts have not been anxious to extend by construction the liability of a trustee for a violation of the duty imposed by the statute, they have nevertheless manifested a disposition to apply the remedy which it- is designed to afford with considerable rigor. The portion of the answer demurred to was undoubtedly drawn by the pleader„with the sole idea of setting up by way of justification a state of facts which might be regarded as tantamount to an abandonment by the corporation of the business for which it was organized, as well as a practical termination of its corporate functions. It is true that in the last paragraph there is an allegation to the effect that the plaintiff, his assignor, and Calvin P. Brown each had due knowledge of all the facts, which, as' has been shown, stand admitted; and upon the argument it was contended that for this reason the plaintiff should not be permitted to recover. But if it may be held that such a defense is sufficiently pleaded (of which there is serious doubt), it would be difficult, in view of repeated adjudications, to make it available upon the facts of this case. Had Mather continued to act as a trustee until the default complained of occurred, unquestionably neither he nor his assignee, within well settled principles,' could maintain this action. Briggs v. Easterly, 62 Barb. 51 ; Bronson v. Dimock, 4 Hun, 614 . But, as is said by Yan Brunt, J., in the latter of these cases, the reasoning therein does not apply where it appears that the assignor, as in this case, had ceased' to .be a trustee before the failure to file the annual report, and it necessarily follows that the mere fact that the plaintiff and his assignor are stockholders, that'as such they were present at and participated in the meeting of December 13th, and were made thoroughly acquainted with the financial condition of the company, does not constitute any defense; and so it was expressly held in Sanborn v. Lefferts, 58 N. Y. 179 . It remains, therefore, to determine whether the averments set forth in the second defense to establish such an abandonment by the corporation of its business as would justify its trustees in omitting to file the annual report required by the statute. It has been repeatedly held that where a corporation is practically dissolved and abandoned the requirement as to filing a report is no longer in force (Bank v. Studwell, 74 N. Y. 621 ; Losee v. Bullard, 79 N. Y. 404 ; Bruce v. Platt, 80 N. Y. 379 ; Van Amburg v. Baker, 81 N. Y. 46 ), and in reviewing these